Facebook to show you ads based on your Web browsing

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Currently, Facebook ads are targeted based on users' profiles and the companies or other pages they "like."

Story highlights

Facebook Exchange will use Web browsing to target ads

Browser cookies will let advertisers hyper-focus their offers

Facebook says users may opt out of the ad model

"Real-time bidding" is already used by Google, others

Facebook will soon be using your Web browsing to help decide which advertisements you see.

A new Facebook system will use your activity on other websites to send you what Facebook thinks are ads about your current interests. Advertisers will, in effect, be bidding to get their ads in front of you.

Here's an example: Say a Facebook user visits a travel website and clicks on a page about a vacation package to Las Vegas. If an advertiser has bid on that kind of search, that user could then see ads for discounted trips to Vegas the next time they visit Facebook.

"By bidding on a specific impression rather than a larger group, advertisers are able to show people more relevant ads while also running more efficient and effective campaigns," a Facebook spokeswoman said in a written statement.

The site announced the new system, called Facebook Exchange, to marketers last week. It's expected to begin rolling out in the next couple of weeks.

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Real-time bidding is already widely used across the Internet. In a blog post, Mike Stiles of Atlanta-based social marketing company Vitrue compared the feature to Google's Ad Words, which pushes an advertiser's ad in front of users when they search for a keyword that advertiser has chosen.

"The underlying principle is that users want relevant ads, advertisers don't want to waste money on misguided ads, and Google wants both users and advertisers to be real happy so they'll come back again and again," he wrote.

Currently, Facebook ads are targeted based on users' profiles and the companies or other pages they "like." Stiles writes that model will still be available for advertisers, but the new one should be more specific.

Facebook noted that users will be able to opt out of Exchange by going to the site's About Ads page, by clicking on an "X" that appears on the ads themselves or by blocking cookies on their Web browser.

The company statement said Facebook won't share any user data with the advertisers and that no advertising controls that users currently have will go away.

Jim Anderson, Vitrue's chief operating officer, said the new system probably won't appear dramatically different to the typical Facebook user.

"It's not going to be discernible to most consumers," he said. "Most people won't notice any difference or, to the degree they can discern a difference, it will be 'Wow ... this is more relevant to me.'' "

And while the "real time" nature of the new system will enhance relevance, it won't be perfect, according to Anderson.

"It's possible you might not be served an ad until after you took that trip to Vegas," he said, referring to the previous example. "But without this kind of targeting, you might be served an ad for a trip to Miami, which you weren't considering anyway."

As Web giants like Facebook and Google get better at harvesting user activity, using Web searches for advertising is becoming increasingly popular. According to research firm International Data Corporation, more than $5 billion in online advertising is expected to go to real-time bidding ads in the United States in 2015. That's 27% of what's predicted to be spent, up from less than 10% last year.

Facebook, of course, is increasingly under pressure to demonstrate a sustainable advertising model since its stock went public last month. Anderson predicts the site will continue to diversify how its ads work in the coming months.

It's sometimes a tricky prospect. It was just revealed that Facebook settled a lawsuit last month by the state of California over its "Sponsored Stories" feature. According to reports, Facebook paid $10 million to charity after five users claimed the site broke California law when it used their posts in the feature without paying them.